The New Year is upon us! A new chapter will be written in the year 2011 as global economies struggle to claw out of the recession and see prosperous growth. The year overall was a positive one for markets. We now have the TSX at 2 year highs, gold setting records almost by the day, and oil prices that will be breaking through $100 a barrel. So what has this mean to you the penny stock investor?

In this 3 part series we’ll cover the stocks we mentioned at the beginning of 2010 and see where they stand today. Part 2 will be an update to the penny stock portfolio that was mentioned at the Penny Stocks Watch blog. Finally, wrapping things up, will be a post on how we move forward in 2011 based on how the markets closed out the year 2010. So let’s get things started here: (if you need a refresher the preview of 2010 is here)

Stocks of 2010

GWG.V – This is the stock that I’ve been on about for a long time now and 2010 proved to be one of the most profitable years to have owned this one if you timed your entry properly. At the beginning of the year it started out at $0.29 a share and had downward momentum and was continuing in that way. In fact, the stock traded to 52 week lows of $0.15 but things started to turn around. Great Western Mineral Group started making strategic purchases in line with its overall business objective which was extremely positive for the stock.

The China factor is continuing to be a positive influence on the stock as well. China holds the most significant reserves of rare earth elements and has been on record of late stating that they will be restricting the export of the elements. This is where companies like GWG benefit since they’re operations are primarily outside of China and are willing to supply to purchasers requiring the rare earths that can’t get them from China.
Ending the year off this stock is at $0.58, and had reached a high of $0.61. If you timed your purchase just right you could have had a 300% return on this one stock this year. If you’re more modest and bought in at $0.29 and are still holding at $0.58 you have a double in price. The market certainly hasn’t done that.

WND.V – Western Wind Energy Corp was the 2nd pick of 2010 however didn’t perform as stellarly as GWG however all is not lost. The stock price is down from the beginning of 2010 however is on its way back up. If you were able to pick the bottom of this one in October you would be sitting on a 60% gain. That’s still a pretty amazing return on investment among anyone.

The reality though is if you were in this one from the beginning of 2010 you’re down 20% and losing money isn’t a good thing, however all is not lost on this stock and WND has begun a share repurchase program which should indicate that the directors of the company think the company is worth investing its own money in. That is usually considered to be a good thing.

The Reality Of Penny Stocks

There’s an important message to get from the two stocks that were featured this past year. That message is one of the win/loss ratio and penny stocks. In this case we have a 50/50 win-loss ratio. However, the winner was up 100% and the loser was only down 20%. So in reality we could have had even more losers and still came out ahead on the year. In penny stock investing as in investing at large, money management is crucial. Knowing where to let your profits run and knowing where to cut your losses will keep you profitable even when the win/loss ratio doesn’t look like it’s working in your favour.

In the next part of the series we’ll look at a series of stocks that were featured on the Penny Stocks to Watch blog which is closely related to this blog.

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